We broadened and diversified the portfolio's holdings. Our focus remains on technology companies that we believe are durable winners in the current environment with the potential to benefit from lasting behavioral changes on the other side. We also increased the portfolio's exposure to a cyclical recovery, adding to positions in semiconductor stocks exposed to the memory complex and solidifying our positioning in names that we believe are integral to the semiconductor capital supply chain.

Software

We regard the business models and growth runways available in cloud-based enterprise software as some of the most compelling over the long term. As enterprises seek to reduce costs, improve efficiency, and engage with customers across multiple channels, high-quality providers of cloud-based software could see the uptake of their solutions accelerate. We favor names that we believe can penetrate large addressable markets and stand to benefit as the digitalization of the enterprise gathers steam. We refined our positioning in this subsector to reflect evolving risk/reward profiles.

• We initiated a position in Square, a payment service provider focused on small merchants, at an attractive relative valuation. We are encouraged by Square's resilient small and mid-size business (SMB) base. We are also impressed with accelerating engagement with the company's Cash App service, which has been the stock's main valuation driver. Although we are mindful of the potential for Cash App fundamentals to decelerate over the coming quarters, we are more bullish on the long-term future of the business. In particular, we see the opportunity for increased synergies across Square's SMB and Cash App segments, which could drive higher returns.
• HubSpot provides software-as-a-service (SaaS) marketing and content resource management applications to small and mid-size business customers across a range of verticals. We initiated a position, as we are encouraged by the company's robust customer growth and impressive subscription revenue momentum. In our view, HubSpot should benefit from secular tailwinds and a strong management team.
• We added to our position in Slack Technologies as the stock sold off due to noisy quarterly earnings results. We continue to view Slack Technologies as a highly strategic asset, as the company's focus on messaging solutions and the ease with which its platform integrates services from other cloud-based software providers encourage viral adoption. This, in turn, shortens sales cycles and gives the company a top-tier margin profile. We are also drawn to the unique external network potential that Slack Technologies offers. In our view, these qualities give the company a massive addressable market that spans a wide range of industries, creating a long runway for growth.
• Intuit is a leading provider of financial software for consumers, SMBs, and professional accountants. We eliminated our position. In a normal environment, the company should have an opportunity to drive topline growth as it transitions to a SaaS model and new features gain traction among business customers. However, we reallocated our funds into other names that we see as having greater risk/reward potential or where we have a particular information edge.
• We eliminated our stake in Proofpoint. We still believe that Proofpoint's suite of leading email security solutions stands to benefit from strong demand growth as hackers increasingly target this vulnerability and enterprises shift their email to the cloud. We also value Proofpoint's SaaS model, growth potential in international markets, and ongoing investments to address emerging threats. However, we are wary of the possibility of coronavirus-related challenges weighing on the company's results in the back half of the year. Additionally, we are mindful of a reduced growth ceiling as the company continues to mature.

Internet

Our internet holdings focus on platform companies that we believe have significant competitive advantages and compelling long-term growth prospects. We tend to favor the large social media, online advertising, and e-commerce companies in developed and emerging markets because we think that their strong balance sheets, internal talent, superior computing infrastructure, and valuable data position them to drive future innovation. We pared our exposure to this subsector, eliminating stakes in companies where the thesis has changed and moderating the sizes of certain positions.

• Snap operates Snapchat, a communication tool that is especially popular among users who are 13 to 24 years old. We eliminated our position due to a reduced risk/reward profile as the company fell short of its user growth projections. Additionally, longer term, we recognize that Apple's eventual rollout of its opt-in privacy feature will be a negative for app publishers like Snapchat.
• Alphabet boasts leading positions in search, programmatic advertising, mobile, and video. We sold shares on relative strength in order to manage our position size following share price appreciation in recent periods. Although we acknowledge the risk of stepped-up regulation, we believe that Google's parent company is well placed to deliver sustainable growth as it leverages its rich trove of user data and strength in AI to improve monetization across its platforms. In our view, the company's strong balance sheet, coupled with world-class computing talent and infrastructure, give it a leg up in driving innovation internally and through private investments. Alphabet's ancillary growth opportunities that show promise include cloud services, AI-enabled hardware, and autonomous driving.

Semiconductors

We increased the portfolio's exposure to a cyclical recovery, adding to positions in semiconductor stocks exposed to the memory complex and solidifying our positioning in names that we believe are integral to the semiconductor capital supply chain. We acknowledge that coronavirus-related challenges could push out the timing of a recovery cycle in key semiconductor markets, especially those with exposure to automobiles and smartphones. However, over the long term, we believe the secular trend of increasing demand for advanced chips in data centers, AI, and automobiles and other industrial end markets remains intact.

• Taiwan Semiconductor Manufacturing remains the leading-edge process foundry. We added to our position as share prices rose dramatically in July due to Intel's weaker-than-expected execution on leading-edge nodes, which we believe will bring more opportunities to Taiwan Semiconductor Manufacturing as the market consolidates. In our view, the supply/demand dynamics for leading-edge nodes are very favorable for Taiwan Semiconductor Manufacturing.
• We initiated a position in MediaTek, a fabless design house that focuses on providing handset chips to emerging market handset vendors. Following a solid quarterly earnings report and raised guidance, we believe the company is well positioned for broad-based revenue growth over the near term. In our view, the company stands to benefit from increased 5G adoption and strong demand for connectivity and power management chips due to the ongoing shift toward a work-from-home environment. We also believe MediaTek could take advantage of shifting geopolitical dynamics as Huawei Technologies seeks to expand its supplier network.